Difference Between Taxes and Duties (With Table)

A specific country is governed harmoniously when the government of that country puts in efforts to strengthen the country in every aspect right from its economy, educational programs, natural resources, human resources and human rights etc. To boost up a country’s economy government levy a certain amount of money on citizens. That levied amount is called tax. In this article, we are going to see more about (1) Taxes (2) one of the subtypes of taxes i.e. Duty.

Taxes vs Duties

The difference between Duties and Taxes is that tax is a certain amount of money that is levied on aspects such as income, wealth, services, sales etc., on the other hand, duty is charged on commodities that are imported and exported.

There exist several definitions of taxes. According to Professor Seligman, “A tax is a compulsory contribution from the person to the government without reference to special benefits conferred”. Taxes have several characteristics. The major motive of the government to collect tax from citizens is to fulfil society’s interest and strengthen the country’s economy. Taxes are an altruistic form of contribution from a citizen to its country as a citizen doesn’t get any advantages or services in return for it.

Duties are one of the many subtypes of taxes. Duties are charged on wares that are imported or exported by the government. Duties are mainly of two types, namely excise duties and customs duties. Custom Duties are of several types, such as Basic custom duties, Countervailing duty etc. Different countries have different rules and regulations regarding customs duties.

Comparison Table Between Taxes and Duties

Parameters of ComparisonTaxesDuties
DefinitionA certain amount levied on citizens on wealth, income, services, or sales is called taxes. A certain amount levied on commodities that are imported or exported are called duties.
Introduced bySir James WilsonConstitution of India (in India)
Introduced in 18601962 (in India)
Objective of the Government To increase remuneration to meet society’s expenses.Safeguard domestic industry
Sub-categoriesDirect tax, Indirect tax, Progressive tax, Regressive tax, Proportionate taxExcuse Duties and Custom Duties
Basic custom duties, Countervailing duty, Additional customs duty or Special duty, Safeguard duty, National Calamity Contingent duty, Anti-dumping duty, Education cess on customs duty, Protective duties.

What are Taxes?

A certain amount levied on citizens on wealth, income, services or sales is called taxes. In the year 1860, Sir James Wilson introduced the term tax in the economic world and the entire world in general. The fundamental motive of taxes is to strengthen the economy of a country and to meet society’s expenses.

Taxes are of several types and are levied on several things. There exist several modes by which tax is collected. Tax is of several types, and two of its main types are Direct tax and Indirect tax. Examples of Indirect taxes consist of GST (Goods and Service Tax), Custom duty. Direct taxes further segmented into (1) Progressive tax, (2) Regressive tax (3) Proportionate tax. Different countries levy taxes on citizens by different methods. For instance, India follows the method of Progressive tax, wherein the number of tax increases with an increase in income.

It is claimed that the first taxation system was put forth back in 3000-28000 BC in ancient Egypt. There were two forms of taxation, namely corvée and tithe wherein, corvée was a system where people who can’t afford to pay taxes were made to work forcefully for the state. The inclusion of taxes is made in one of the chapters of the Bible as well. The Hittite Empire and The Roman Empire also used a taxation system. In the Hittite Empire, grains from people were collected as a form of tax to display the ruling king’s wealth.

What are Duties?

A certain amount levied on commodities that are imported or exported are called duties. The Constitution of India put forth the taxation form is customs duty in the year 1962. Two main types of duties are custom duties and customs duties.

There are several sub-categories of Customs Duty such as Basic custom duties, Countervailing duty, Additional customs duty or Special duty, Safeguard duty, National Calamity Contingent duty, Anti-dumping duty, Education cess on customs duty, Protective duties.

Regulation of goods that are moved in and out of the country is made well because of Customs Duties. The value of customs duties is directly proportional to the value of goods. Several methods are used to calculate customs duties which involve, comparative value method, deductive value method, computed value method, the fallback method etc.

Customs duties can be paid these days, even online through e-payment portals. Custom duties in different countries vary from each other. For example, in Nigeria, 7.5% of customs duties are levied on several commodities. On the other hand, in India, 10% of customs duties are levied on various commodities.

Different sub-categories of Custom duties have different meanings. For example, Basic Customs Duty is the duty in which the tax is levied at a fixed and particular rate on the goods. On the other hand, Safeguard Duty is the duty used to protect the surge in exports and is charged whenever there is a probability that the surge in exports can harm the prevailing domestic industry. A good harmony is created in the exportation and importation of commodities because of customs duties. Annual rates of customs duty show variations in various countries depending on the amount of charge levied in various countries.

Main Differences Between Taxes and Duties

  1. Taxes are charged on services, sales, income etc., on the other hand, customs duties are charges on commodities that are exported and imported globally.
  2. Taxes have sub-categories such as direct tax, indirect tax, progressive tax, regressive tax, proportionate tax. On the other hand, duties have sub-categories such as Excise Duties and Customs Duties and customs duties is further classified into various types.
  3. Taxes are charged by either State Government or Central Government. On the contrary, duties are charged by only the Central Government.
  4. The tax itself is an independent term. On the contrary, customs duty is a type of tax.
  5. The term “tax” was derived from the Latin word “taxare” on the contrary. The term “duties” was derived from an Anglo-French word “deueté”.

Conclusion

Both taxes and duties are forms of taxes that meant for building a stronger economy of a country, and it is every citizen’s responsibility to pay their taxes on time without being irresponsible or delaying it.

Nowadays, a feasible option of online customs duty payment through e-payment portals has made paying taxes easier.

Various developments in the taxation system are made ever since its establishment. People often criticise or delay while paying taxes, but they don’t get the fact that their contribution can widen and brighten their respective country’s future by building its economy.

References

  1. https://en.cnki.com.cn/Article_en/CJFDTotal-YJSA201003010.htm
  2. https://www.sciencedirect.com/science/article/pii/0304405X78900090
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